Wednesday, December 9, 2015

Kinder Morgan Cuts Dividend by 75%... (KMI)

From Barron's Income Investing:

Investors who doubted whether Kinder Morgan (KMI) would actually cut its dividend, now have to face the cold hard truth.

The pipeline giant announced Tuesday after the close that it is
slashing its annual dividend to 50 cents from $2.04. Its shares
immediate fell in after-hours trading. By 5 p.m. the stock was showing a
7% drop to $14.60 from a close at $15.72.

The company said the reduced dividend payment, which it foreshadowed in a press release last Friday, would give it the capital it needs to fund its expansion plans and allow it to maintain an investment grade credit rating.

Rich Kinder, executive chairman of the KMI board, said in the statement:

We evaluated numerous options, including significant
asset sales, but ultimately concluded that these other options were
uneconomic to our investors in the long run. This decision was not made
lightly, but we believe it is in the best interests of the company, its
shareholders and employees. It will allow us to continue to maintain and
grow our outstanding set of midstream energy assets without being
required to issue equity at valuations prevalent in today’s market while
maintaining a solid investment grade rating on our debt obligations. We
are directly addressing concerns about our investment grade rating and
concerns about the need to issue additional equity. We believe today’s
action is beneficial to our shareholders.

The dividend cut begins with the fourth quarter payment due in February....MORE

...Because there is no longer a place on the chart you can point to and
call long term support, the trick now will be judging when the sellers
have exhausted themselves. To that end a cut in the dividend would
probably have the paradoxical effect of setting a firm bottom.

In late pre-market trade the stock is up 67 cents (4.26%) at $16.39.
More to come.